Texas Home Prices Hit New Highs, LPS Says

NEW YORK ( TheStreet) -- Home prices are rising at a scorching pace in Phoenix, Las Vegas and San Francisco, but the real housing recovery story is in Texas.

National home prices are still about 20% below their June 2006 peak, but in Texas home prices are now at a new peak, according to data from Lender Processing Services.

Home prices in Texas inched up 0.7% in March over the previous month and are up 4.7% year-over-year. Those are mild gains compared to the average gains reported by other states in the U.S.

The LPS Home Price Index (HPI) rose 1.4% in March over the previous month and was up 7.6% on a year-over-year basis. The LPS index, unlike other indices, excludes the impact of foreclosures and short sales.

The widely followed S&P Case-Shiller Home Prices Indices were also released Tuesday. The national composite index recorded a 10.2% gain in the first quarter of 2013 over the first quarter of 2012. The 10-City and 20-City Composites posted annual increases of 10.3% and 10.9%, respectively, in March.

Still, the Texas cities of Austin and Dallas are seeing home prices at new highs, according to LPS. Meanwhile, home prices in Houston are just 0.3% below the previous June 2007 peak, while San Antonio home prices are just 2.1% below their August 2007 peak.

Colorado is another state that is very close to its previous peak with home prices just 0.7% off June 2007 highs. The housing market in Denver is at a new peak.

Despite soaring home prices in Arizona and California, however, these states still have a long uphill road to full recovery. Home prices in Arizona are still down 35% from their May 2006 peak, while in California, home prices are nearly 32% below the April 2006 peak.

While the recovery in home prices in other states is a rebound from dismal lows, the recovery in Texas appears to be backed by strong underlying fundamentals.

The housing market in Texas did not experience the meteoric rise in home prices that were characteristic of other states during the bubble and did not crash as hard during the bust. The job market in the state has also remained relatively steady thanks to its strong energy industry.

While there are concerns that the recent gains in housing may not be sustainable, homes in Texas remain relatively affordable and analysts believe the strength in the job market bodes well for continued gains.

The U.S. economy probably added 185,000 jobs in March while wage gains accelerated, a survey of economists showed, reinforcing the Federal Reserve's case for continuing to increase interest rates gradually to keep inflation from overheating while keeping unemployment low.